BEIJING: China is aiming to claw back some of the colossal riches kept overseas by the country's millionaires and billionaires, who have until Thursday to pay new taxes levied by Beijing aimed at filling a growing fiscal hole.
The rapid rise of China's economy in recent decades has produced legions of super-rich – many of who keep their fortunes in trusts across Hong Kong, Singapore, Tokyo and other locations.
However, regulations announced in July levy a tax of 20 percent on dividends and interest gained from offshore trusts, with a 90-day "transition period" for initial payments concluding on Thursday.
The law has prompted a flurry of activity in recent weeks for China's wealthiest individuals and families to sort out their financial affairs, analysts say.
It comes at an uncertain time for the Chinese economy, as local governments that once relied on land sales for revenue face cash shortages amid a years-long property crisis.
President Xi Jinping has long promoted a narrative that he has rectified huge problems that beset China and the Communist Party during the tenures of his predecessors, such as graft and the unequal distribution of wealth.
Nevertheless, Chinese offshore wealth is reported to amount to hundreds of billions of dollars – money Beijing is eager to leverage.
China's fiscal burden will ensure that the enforcement of new overseas taxes will be sustained, Dan Wang, a director on Eurasia Group's China team, told AFP.
Economic challenges will encourage Beijing to expand its taxation of the wealthy, she said, adding that personal income tax will be "increasingly important" as a source of revenue.
Last year, Hong Kong narrowly surpassed Switzerland to become the world's top host for foreign or cross-border capital, according to a report by the Boston Consulting Group.
The sum of US$2.9 trillion held in the Asian financial hub was "driven by mainland China flows and a vigorous stock market", the report said.
"With mainland flows representing over 60 percent of assets under management, Hong Kong is cementing its role as China's gateway to global markets," it added.
The new measures have also raised questions, including about whose assets are subject to the one-fifth tax.
The July 24 announcement by the State Tax Administration notes that individuals who have acquired foreign nationality or residency but whose "main economic interests are derived from China" could be subject to the rules.
This stipulation indicates that "obtaining foreign nationality or overseas residency may not, by itself, remove an individual from China's worldwide taxation regime", law firm King and Wood wrote in a statement about the new taxes.
Some analysts see parallels with Beijing's recent campaign to prevent local technology from leaving the country, as economic and geopolitical competition with Washington simmers.
"This is not only a tax on wealth. It's much more than that," Alicia Garcia-Herrero, Asia-Pacific chief economist at Natixis, told AFP.
"It's a way to keep the talent in China," she added.
The new tax policy is aligned with other recent measures imposed by Chinese authorities, she said, such as the blocked acquisition earlier this year of AI startup Manus by US tech giant Meta.
Wang of Eurasia Group told AFP that the taxes also serve to keep capital within China's borders, where they can be accessed for funding to spur "technological innovation."
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